LONDON, April 4 (Reuters) – Is that it for the zinc price or does the market have one last hurrah before the bull cycle turns?
London Metal Exchange (LME) zinc for three-month delivery hit a 10-year high of $3,595.50 per tonne on Feb. 15, the culmination of a gradual but relentless tightening of the supply chain that had been playing out over several years.
Since then zinc has been dragged lower in the broader risk-off pull-back in the industrial metals space and is currently trading either side of the $3,250-per tonne level. Analysts, such as Max Layton of Citi, believe there is still the potential for one last leg higher to $3,800-4,000 per tonne.
But time is running out. “The zinc price in the next three to six months is the best we’re going to see for the next three to five years,” he told last month’s Metal Bulletin Zinc Conference in London.
The LME options market seems to agree, judging by the concentration of bull positioning over the next three months. Thereafter, open interest drops off sharply until December, when bearish views predominate. The consensus, it seems, is for zinc’s bull cycle to peak sooner rather than later before a multi-year down cycle.
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